Shackled to the culture of corruption
by Karl Allan Barlaan and Christian Cardiente
On any given weekday, Customs officials and employees in the busiest collection district, which includes the Port of Manila, literally harvest money like it were growing on trees - in outlandishly abundant quantities. The figures range from a low of P2 million per day as very conservative estimates by insiders allege, to a staggering P100 million daily if Bureau of Customs Angelito Alvarez’s figures are to be taken seriously.
These amounts constitute what is known as “coffee money” or “smiling money” for some—defined by Commissioner Alvarez as the sum that is “voluntarily” given to a Customs employee or official “as sign of appreciation for a job well done, for trade ‘facilitation’— earmarked by importers to fast track the release of their goods.”
As “processing fees” paid by private business to government, these figures—potentially totalling half-a-billion weekly, P2 billion monthly, and P24 billion annually, in the Manila port alone—consist but a fraction of what the state loses from undervaluation and misdeclaration. The conventional logic is, of course, that importers collectively throwing away P24 billion annually in “coffee money” without so much as a whistle and a smile must have surely gotten away with several times that amount in unpaid duties and taxes. Multiply that by a few hundreds and factor in 16 other Customs collection districts in the country, though admittedly not as “profitable” as the Manila port, and the result is as mathematically astounding as it is legally deplorable.
Initial information from sources conservatively pegs the amount to P2 million per day, computed from an average of 2,000 import entries per day multiplied by a minimum of P1 thousand in “coffee money” per import entry. “Import entry” is anything from a kilo of parcel to 20 containers or even a shipload, corresponding to one entry, covered by one invoice, one shipping document or import declaration referred to as the Bill of Lading.
Totalling P10 million weekly, the amount is divided among employees and officials every Friday, an insider alleges. “Monday to Thursday, at past 4 pm, the parking lot at the Port of Manila is almost vacant. But go there Friday evenings and it’s packed,” he says.
Of ‘ribbon-cutting’ days and counting machines
Alvarez does not deny the accusations but clarifies that he has no part in it. In a television interview, responding to questions supplied in part by the Manila Standard, the Commissioner corrected that it was not 2,000 import entries per day at P1 thousand per import entry: “depende na ‘yan (it depends), 5,000 containers per day at P15 thousand to P20 thousand per container.” Potentially, if Alvarez understood the question correctly or had provided accurate information, the figures should balloon to anywhere from P75 million to P100 million in daily “coffee/ smiling money.”
Moreover, he also admits that the amount—anywhere from P375 million to P500 million weekly, based on his daily estimates—is indeed distributed every Friday in what he calls as “ribbon-cutting day,”—but “(which excludes) the Office of the Commissioner.” Or at least, according to Alvarez, he personally has never been a recipient though he has sent three of his former chiefs-of-staff on “vacation” because of reports that they have accepted money on behalf of his office.
Such is the amount of cash circulating in and around Customs offices that Alvarez could not categorically deny allegations that five counting machines were physically situated in the office of his predecessor. “Narinig ko rin ‘yan (I’ve heard of that, too),” he admits.
The window for corruption
The Customs Commissioner is also curious why his predecessors did not automate transactions in the agency. “It surprising that we have had good people there (in the BOC) and still they’ve neglected that (computerization).”
Insiders say that it is because the arbitrary nature of assessment provides the perfect window for corruption. Over the years, the bureau has found a way to provide a semblance of computerization in its operations, automating the front and back ends of transactions—“filing” and “releasing”—but not the all-important “assessment.”
Therein is the basic weakness of our customs processes. Because assessment is manual and subject to the whims of appraisers and examiners, the “per lata” in the ports and “por kilo” in the airports have allegedly become the mode of transaction between the government and unscrupulous businessmen.
Pre-determined amounts are collected per import entry depending on the importer’s declarations—often undervalued. The arrangement is “take it or leave it.” Should the importer disagree, transactions go through the usual processes— longer and more costly. For as long as the imported products do not include drugs, guns, and other prohibited goods, dutiable items may be released for less than half of what the importer would otherwise pay. “For example, Lacoste shirts are declared as generic items—t-shirts with collar – (under)valued at $1-2 per shirt. Customs has no records whatsoever of any item of that brand ever being legally imported into the country,” says a source.
“Brokers” facilitate the deals. “If they’re good enough and if items are instead named to dummies, a firm can import items without official records of importations, (which means) no inventories, no cost of goods, and no need to declare anything with the BIR (Bureau of Internal Revenue).” This negates Finance Secretary Cesar Purisima’s statement that harmonizing the country’s list of importers and tax payers would expose possible tax evaders.
‘Reseta’ and ‘crying money’
Moreover, the “per lata” and “por kilo” are subject to change without prior notice, again depending on the whim of higher-ups in the organization. Allegedly, deputy commissioners have alert powers, referred to by insiders as “reseta,” whereby orders are issued to subordinates for increased assessments in order to raise daily, weekly, or monthly collection quotas.
Still, there is the “crying money”—the opposite of “smiling money,”—which is a mere euphemism for “extortion.” Businesses are allegedly forced to pay more under threat of investigation or litigation.
And while Alvarez does boast of having filed at least 18 smuggling cases so far and—because “it takes two to tango”—of also having charged 22 Customs employees with administrative and criminal cases for having conspired with smugglers, he also admits that a complete reform of the agency “within this lifetime” is a near impossibility. “Kung ‘yang (corruption) ay completely ipagbabawal ko, sasabihin kong huwag na huwag kayong tatanggap... ay parang naglolokohan lang tayo, kahit anong sabihin ko... pag dating ng Biyernes at nag-aabutan diyan ... ay meron ba akong way para ma-stop yan? (Should I ban corruption and tell those in the Bureau not to accept bribe money, it’s like we’re just making fools of one another. No matter what I say, come Friday and money is being handed out, can I do anything to stop it?)”
“Humihingi ako ng tulong sa kanila, mag-sting operations tayo, mag-entrapment tayo, pero ayaw naman nilang tumulong sa ganyan (I ask for their help, let’s do sting/entrapment operations, but they don’t want to help in those matters),” Alvarez adds in a seeming indictment of his own colleagues in the bureau.
106 years of old habits
But while Customs and Internal Revenue remain the fulcrum from which swings President Benigno Aquino III’s reform agenda in terms of increasing revenue collections by curbing corruption, the task requires more than just lip service. It necessitates the overhaul of a system that has become synonymous with an oft-cited culture of corruption in the country.
Even at the beginning of her term, Internal Revenue Commissioner Kim Henares started filing tax evasion cases twice weekly upon orders from the President. But even amid perceptions among agency employees that the Bureau is at “its cleanest in a long while,” even Henares admits that reforming the agency will require “undoing 106 years of old habits.”
“In the Filipino culture now, (the) line between right and wrong is already blurred. Bribery has become acceptable because (of) the way we teach our children—have good grades and I’ll give you a phone; graduate from college and I’ll give you a car. In effect, we’re reinforcing the behavior of giving something for doing something. The sense of right and wrong has become blurred (and) it is reflected in the whole society. For me, it’s still wrong,” Henares says.
Over the years
“Wrong” as it is, the culture of corruption has long been institutionalized within the BIR. Insiders confirm that the same practice that was first exposed by retired senior examiner Socrates Aguinaldo in 1999 is still the norm—exercised with the same impunity as in the past, only with greater caution under Henares’ watch: “Thirty percent goes to the examiners of the group assigned to audit a taxpayer while the supervisor’s share is 15 percent. The division chief and the assistant chief each get 20 percent. The rest of (the money) goes to the higher officials such as the commissioner, the assistant commissioner, and deputy commissioner in charge of the group doing the assessment.” (PCIJ’s “The Taxmen Share their ‘Loot”)
The “profit sharing scheme” is, however, not written in stone, alleges another source. How much an employee or an official takes home is directly proportional to the influence, rank, or position in government of his backer or political benefactor.
This is also the reason that the practice persists—because some backers purportedly outrank the Internal Revenue commissioner. These people inhabit the Legislature, the Executive, or even the Judiciary—“whoever has the power to appoint or influence appointments,” alleges a revenue examiner, who refuses to be named. “There is always a way to make you conform (to the practice). If I refuse to cooperate, they (businessmen / taxpayers) will just go to my superiors. If my superiors still do not give in, well, there are (other) officials outside of the BIR... senators, secretaries, congressmen,” he says.
And then there are some other ways—“once, they (unnamed negotiators for a taxpayer) showed me a picture of my wife. Alam ko na ibig nilang sabihin (I understood what they had meant). Pag ganun na ang usapan pipirmahan mo na kung ano ang gusto nila (When it comes to that, you’d sign whatever they want you to),” he narrates. They had made an assessment of their own payables and made the examiner concur under threat.
Reward and punishment
Allegedly, it is not only because of the promise of wealth that an ordinary government employee tolerates or participates in corrupt practices. Sometimes it is also through fear of reprisal. “Ano gagawin mo kapag ikaw ang kunwari na-entrap ... i-setup ka ng ino-audit mo, ka-trabaho mo, at pulis? Pilitin kang hawakan ‘yung marked money. Nangyayari ‘yun. (What do you if they falsely entrap you ... if you get set-up by those whom you’ve been auditing aided by your own colleagues and the police? What if you’re forced to touch marked money? That happens),” alleged the source.
Such is how corruption has become part of culture – a perversion of synergic cooperation among government, private, and law enforcement sectors – either tempting or coercing the individual to conform, whichever is applicable, most effective, or necessary at the time.
For those who willingly choose to join the bandwagon, the payoff could be very rewarding. In the BIR for example, depending on a host of factors such as the amount of business in a particular tax district, a corrupt revenue district officer can easily make P8 million in a year, divulges an insider. Usually he targets an amount in excess of P10 million, with the balance earmarked for other agency officials and the personalities most instrumental in his appointment.
There are 130 revenue district offices nationwide.
As if the BIR and the BOC case studies were not enough to draw a picture of graft as a seeming collusion among sectors - givers, takers, and protectors – there is also the case of the Department of Public Works and Highways, named in 2009 by Pulse Asia as the most corrupt government agency in as far as public perceptions go.
Despite efforts to cleanse itself of corrupt practices and improve public perception, the DPWH continues to figure in high profile corruption charges, reinforcing the persistent notion that the agency remains graft-ridden and its anti-corruption campaign, mere rhetoric.
From the usual bribes to secure government projects, the scheme has allegedly evolved into a deeply-rooted cartel or mafia of contractors, politicians, and government officials – all purportedly in connivance to extract kickbacks from government projects.
In January 2009, the World Bank blacklisted seven firms, including three Filipino contractors – “for engaging in collusive practices under the bank-financed road projects in the Philippines.”
As both congressional houses conducted separate public hearings on the alleged bid-rigging of government road projects, reports linking then an influential personality from the Palace and a former senator to the World Bank road scam also surfaced.
The House committee on public works and highways has since cleared the blacklisted firms of collusive practices, dismissing the bank’s claims as unsubstantiated. The contracting firms, including all involved national personalities, have also denied the bank’s allegations on various occasions.
News reports quoting one of the bank’s Department of Institutional Integrity’s “strictly confidential” reports concerning the WB-funded National Road Improvement and Management Project-1 quoted an overprice of somewhere between $30 million and $45 million for the $150-million project loan.
The amount was supposedly split among contracting firms, agency officials, and politicians – with as much as 15-20 percent of the inflated project cost earmarked for politician-sponsors, according to a contractor-source interviewed by the bank.
The same bank report noted that frequently, bids emanating from the “mafia” are 20-30 percent above official cost estimates. On top of this, contractors – as a matter of practice – bloat project costs by another 20 percent, discloses another source.
On the micro-level
On the level of local government units, not only do favored contractors allegedly get the same level of preferential treatment from public officials, those engaging in illegal activities are also able to register and operate as legitimate business enterprises.
Despite having been exposed by major television networks on numerous occasions, massage parlors and girly bars reportedly operating as prostitution dens continue to thrive in some major cities. In Quezon City alone, at least 10 of these establishments have operated unabated for years on main thoroughfares Timog and Quezon avenues.
For observers, it no longer comes as a surprise that if such is the case for a major city in the National Capital Region, the situation is most likely worse in areas not within close proximity to law enforcement offices or the prying eyes of various media outfits.
In fact, the paradox is that while illegal businesses find a way to operate with ease, according to the 2010 World Bank Doing Business Report, legitimate businesses are never so fortunate. “The procedures are so burdensome that entrepreneurs may have to bribe officials to speed up the process,” says the report.
Checks and balance?
Supposedly, keeping both the police and the LGUs in line is within the scope of the Department of Interior and Local Government’s mandate. But the agency is itself struggling in a quagmire of controversy involving the illegal numbers game jueteng. It is thus perceived as largely ineffective—if not due to the absence of political will, then because of a dire lack of moral ascendancy.
Up until recently, the realm of non-government organizations has seemed the preferred rallying point from where the battle against corruption may be waged. But even the sector has also been tainted – with reports that Code NGO of now-Social Welfare Secretary Dinky Soliman had earned a windfall profit of P1.48 billion for a project that had cost public coffers billions in supposed Peace Bonds.
So pervasive is this so-called culture of corruption that a 2010 Transparency International report says the level of corruption in the Philippines has worsened in the last three years, with the country being perceived as 12th most corrupt in a field of 178 nations.
The same international watchdog reports that according to its Global Corruption Barometer, 48 percent of respondents in the Philippines say that the government has been ineffective in its anti-corruption campaign, as opposed to 28 percent who say it has been effective. (Twenty-four percent of respondents say government has been neither.)
Further, 69 percent of those surveyed say they believe that corruption has increased within the last three years.
Transparency International also estimates that 20 percent of the budget is lost to corruption annually. Given a budget of P1.645 trillion for 2011, and should corruption of this magnitude remain unabated, the country stands to lose P329 billion in taxpayer’s money by year’s end. The said amount is more than the P207 billion allotted for education; nearly thrice the P110 billion budget of the DPWH; almost 10 times that of the Agriculture Department’s P37.7 billion. Projected losses would also suffice to offset the country’s P300 billion budget deficit.
Shared responsibility, blame
According to lawyer Noel Villaroman, author of “Laws and Jurisprudence on Graft and Corruption” (CentralBooks), the public is as just as blameworthy for corruption and its prevalence.
“Aside from thieves in government, the general public’s overall indifference is to be blamed why corruption is rampant in this country. Our collective indifference emboldens corrupt officials to steal with impunity...the sad reality is this: if we are not personally and directly injured by corrupt acts, we usually do not take positive actions to combat corruption,” says Villaroman.
“We have two competing viewpoints about corruption in the Philippines. The first is our formal condemnation of corrupt behavior; and second is the reality that we tolerate, condone and let it pass. Indeed, it is a great paradox. The first is embodied in our formal laws and institutions created to fight corruption. Our leaders also formally condemn corruption when they speak in public. In stark contrast, the second embodies our society’s general leniency and tolerance of corruption. It is also the theme of our leaders’ private conversations that are purposely hidden from the public. Hypocrisy has not been better illustrated than this.”
Of paradox and hypocrisy
Evidently, both the paradox and the hypocrisy have persisted through several regimes. Aside from Ferdinand Marcos, whom TI has named in 2004 as part of a list of world leaders who have allegedly embezzled huge sums during their incumbency, all other post-Marcos presidents and their administrations have never been able to evade the same allegations of graft.
While Cory Aquino “herself is considered incorruptible, critics accuse her of turning a blind eye to family and friends (Kamag-anak, Inc.) who are said to be enriching themselves at the public’s expense,” wrote Time Magazine in 1990.
Fidel Ramos was implicated in the P1.8 billion PEA-Amari deal dubbed as“The Grandmother of all Scams” by the PCIJ in 1998 as well as in the allegedly overpriced Expo Pilipino flagship project of his administration.
Joseph Estrada was ousted from office because of allegations of protecting jueteng in 2001. He was convicted of plunder in 2007, but was pardoned by Gloria Arroyo on the same year and set free after more than six years of imprisonment.
Gloria Arroyo and her family were also accused of involvement in several anomalous transactions: the multi-million peso Jose Pidal bank accounts, the anomalous P728 million fertilizer fund scam, and the aborted $329 million NBN-ZTE broadband deal, among others.
Recently, international policy institute Heritage Foundation named the Philippines “mostly unfree” because of a “long-standing culture of corruption.”
Some government employees still turn to corruption for fear of losing their jobs, or worse, their lives; private businesses give bribes to fast track transactions because the perception is that there is no other way to do business in the Philippines; officials still invoke the so-called culture of corruption as a convenient excuse for their inability to institute governmental reforms. Meanwhile, the poor entrust their fate to doles when hundreds of billions in taxpayers’ money is lost to corruption annually.
Despite more than a century of independence and 25 years after the first People Power Revolt, international observers may be right. We were never really free after all.
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